Posts Tagged ‘negotiation’

Anyone who has ever done any amount of work as a contractor or who has represented them in collections cases has learned from hard experience that it can be all but impossible to get paid for one’s work. In Pennsylvania, there is the Contractor and Subcontractor Act (CASPA) was introduced in 1994 as a complement to the Pennsylvania Mechanic’s Lien Law and was intended to provide contractors (and subcontractors) with additional remedies against those owners/contractors withholding payment for their services. However, the landscape of these payment disputes is likely to significantly change as a result of recent legislation.

Last year, a Pennsylvania state representative introduced a bill, which sought to substantially amend the act and for the first time since 1994, provide further protections for contractors against those withholding funds for the work. That bill has languished in the House Commerce Committee since last year. Nonetheless, a similar bill amending CASPA was referred to the state senate and in June 2018, Governor Tom Wolf signed the bill into law as Act 27. Amongst the numerous amendments to CASPA, Act 27 now provides:

If an owner fails to adhere to the terms or withholds payment, contractors and subcontractors may stop performance of the work (subject to contractual limits);

There is no permissible waiver of any provision of CASPA;

Failure to provide the contractor with a 14 day written notice of a deficiency results in a waiver of the right to withhold payment for the deficiency and requires full payment of the invoice;

If a party alleges an invoice contains an error, that party must pay the correct amount on the date payment would otherwise be due otherwise it will be an improper withholding; and,

Withholding retention for longer than 30 days after final acceptance of the work generally qualifies as improper withholding.

These new changes are scheduled to take effect on October 10.

Without question, these changes increase the negotiation power of contractors and subcontractors, however, more importantly, the changes reinforce the need for owners and contractors to maintain clear payment records as only clear payment records will provide owners and contractors a sufficient defense in any payment dispute. Owners, contractors and subcontractors involved in payment disputes need to be aware of their respective obligations and rights.

Anyone in the construction industry that has questions about these amendments and how they may affect their business or current projects, please contact Jonathan Romvary at [email protected].